Govt will not rescue troubled developers

KUALA LUMPUR: The government will not bail out property developers, particularly those building high-end projects, who failed to sell their units and faced financial difficulties, said Second Finance Minister Datuk Seri Johari Abdul Ghani.

The government has frozen approvals for luxury developments from November 1, 2017 to stabilise the property market.

“This is a temporary freeze and not a blanket ban and when we see that things are better, we will review the situation. There is no particular timeline for the freeze.

“The concern is at the fringes of the Klang Valley, Johor and Penang. We want developers to look into the details and the right target market, because at the end of the day, if you (developers) have problems, and the bank have problems, we (the government) will have a problem,” he said.

Johari said problems would arise when developers failed to sell the high-end properties, priced between RM2 million and RM3 million.

“The banks would have a problem when this happens, and Bank Negara Malaysia has cautioned the banks. So, they need to look at this very seriously,” he said after witnessing the signing of a Memorandum of Understanding (MoU) between Eco World International Bhd and UK-based Be Living Holdings Ltd here yesterday.

Johari said the authorities did not have any issue with luxury developments in the Kuala Lumpur City Centre and Bukit Bintang as there were strong demand from buyers, as well as investors.

“Properties in these areas are very much in demand. If the high-end developers have the right location and are confident that the development would attract buyers, and the banks are confident in financing the projects, why worry?” he said.

According to a recent report, Malaysia has an estimated RM35.5 billion worth of unsold and unutilised properties, and a residential overhang of 130,690 units worth RM20 billion.

The residential overhang comprises unsold units in completed projects and serviced apartments built on commercial titles.

The report said the Klang Valley has about 20 million square feet (sq ft) of vacant purpose-built office space worth RM10 billion, and up to seven million sq ft of vacant retail space valued at RM5.5 billion.

Despite this huge overhang, the report projected that there would be an additional 13 million sq ft of purpose-built office space and 44 million sq ft of retail space in the market over the next two years. — Bernama